Career CFO vents her frustration over business, human capital, economics, social environment, culture, politics, and everything else; but always with a monetary twist

October 2014 posts

October 08, 2014

When NYC's cabs caught up with the 21st century and started accepting plastic for fare payments...

[Side Note: I always found it fascinating that the habitual check-out question, "Paper or plastic?" is technically applicable not only to the packaging choices but also to the forms of payment - cash (paper) or credit (plastic).]

Anyway, when it happened I was ecstactic: one less reason to touch dirty bills, no more listening to a driver's bullshit how he just started his shift and doesn't have any small bills for change, etc. - many reasons, really. Unfortunately, there was a downside: all Credit Card Systems came with PIM's (Passenger Information Monitors).

It could be just my personal experience, but I have not been bombarded by images and sounds in any other plastic-accepting cabs: not in London, or Tokyo, or Amsterdam... But NYC's TLC (no, not "tender loving care" or T-Boz+Left Eye+Chilli, but the formidable Taxi and Limousine Commission) has swallowed Mad Men's lure long time ago - Inspiria Media has been brokering taxi-top ads' revenues into the agency's pockets for years. They couldn't possibly pass on this incredible opportunity to make money by letting ABC, NBC, and random ass commercial advertisement to jump at you as soon as the meter is on.

And I fucking hate it! I really don't want all that noise and bullshit to exacerbate any further my already unpleasant experience of an overpriced ride in a shitty car with a bad driver. Yes, you can turn it off (assuming the touch screen still retains some capacity for response), but not right away. Thus, if you are like me, you spend the first few moments of the trip tensely waiting for this thing to come alive, so that you can shut it up as soon as possible.

Sometimes you get distracted, though: the driver doesn't understand your instructions or he/she doesn't know how to get there - whatever the reason, but you don't get into the combat with the blaring device right away and you catch things, for better or worse.

It happened to me several weeks ago and what my eyes didn't want to see my brain registered anyway. The screen flashed at me the familiar MTA logo, the words "Budget Proposal," and then three bits of information in large and bold letters:

$14.2 billion annual budget

4% fare and tolls hike

$20 million service enhancements

I turned it off and tried to read my magazine, but the incongruity of these numbers kept eating at me. I couldn't stopped myself from doing a bit of analysis.

$14.2 billionseems like a humongous number to a layman, but considering the scope of operations (Subway, LIRR, Metro-North, 341 bus routes, 7 bridges, 2 tunnels), it's not really such a big deal. I mean, the stupid facebook spends $5.1 billion to keep their operations going and it doesn't own and maintain 15 thousand vehicles, nor it employs 70,000 people. In fact, the entire staff of facebook is exactly 10 times less - 7,000. So, no, the total number doesn't sound too overwhelming to me.

However, there are a couple of aspects that make this number into a bothersome issue:

First of all, where the fuck they are planning on getting this kind of money? What appears to the general public as mountains of cash being shoveled by MTA out of ever increasing fares and tolls is not really all that bountiful. The agency claims around 8.5 million riders per day. Let's be generous and assume that it's like that 7 days a week, 52 weeks a year. At the current fare rate this yields $7.735 billion a year. The Bridges and Tunnels arm collects measly $600 million. That brings us to $8.335 billion. Well, okay, they will hike it up by 4%, squeezing another $333.4 million out of the Metropolitan area residents. Still that's less than $8.7 billion altogether.

Before we go any further let me explain something, in case you don't know: As an entity, MTA is that weird creature called Public Benefit Corporation. Without going into too many obscure details let me just point out that this beast is essentially a Chimera - a combination of a private entity with rights to contract debt independently of the State (the Lion), a municipal agency (the Snake), and a non-profit organization (the Goat). One must keep these bizarre characteristics in mind when faced with the wild and weird facts swirling around this organization.

For example, as a public benefit corporation and a non-profit, MTA should not be making any profits or have excess cash. How could they anyway, if they constantly claim that they don't have enough money to cover their budget? Yet, during the audit of 2013 fiscal year ordered by the City Comptroller state auditors found an absolutely unanticipated $1.9 billion (!) surplus. Nobody is explaining to us how it could possibly happen: nearly $2 billion of unused cash have been discovered within the fiscal system of this "always-struggling" agency and let's leave it at that.

Well, say they put this extra money back into operations (as they must) - that still brings them to only $10.6 billion against the $14 billion needed. So, where the $3.4 billion will come from? We know: from the loans MTA is authorized to take independently! Wow, $3.4 billion of debt! Can you imagine the financial cost on that? Even in the most preferable situation, i.e. institutional (big banks) secured (all those fixed assets to pledge) loans at 2.5% - that's $85 million in an annual interest expense! And if they cannot obtain a sensible deal like that because their creditability has gone down the shitter, we are talking 5%, 7.5%, 10% or more - you do the multiplying.

However, that's actually mere peanuts. If you are wondering where the majority of MTA's current budget actually goes, I can tell you - to keep those 70,000 employees well compensated. Around 60% of the authority's current budget ($7 billion) is used to pay labor costs including payroll, pensions, and overtime. And the Chairman's salary of $350K a year plus his $3,500 per month housing allowance are not an issue here. I mean, it's really not a big deal for a head of such a huge organization. However, they have some bus drivers and train operators making over $100K, with averages around $56K. And guess what? MTA estimates that the increase in labor costs will amount to $260 million during this current fiscal year.

This makes that third number, the $20 million in service enhancements, sound like a bad fucking joke. That's all that will be spent on improving our public transportation experience, 0.14% of the budget? Common people, it's 13 times less than you plan to spend on raises!

You know how small this number is for the system that transports 8.5 million people a day? Let me give you a reference point. You can buy precisely ONE used private jet with the same sum of money. CEOs of Coca Cola, Goldman Sachs and GE each made that much in 2013 annual compensation. Moreover, they were nearly at the bottom of the top 100 highest-paid CEOs list. And Robert Downey Jr. made 4 times more the same year. This means that, if he felt generous, he could've made our commute at least two times (after taxes, of course) better, than MTA will.

October 06, 2014

"You know, I look at popular music, the stuff that's selling millions of records in America, and it makes me angry, actually... If I see Nickelback I want to kill myself. Okay, I want to kill them and then I want to kill myself, and then I want to kill everybody who listens to them."

Anthony Bourdain

Parts Unknown, Tokyo

The Frustrated CFO's comment:

Oh, my God! My sentiment exactly! Nickelback, and fun., and MAGIC! (what's up with all that stylizing, anyway?!), and the rest of them. And by the way, I love QOTSA and see them every time I have a chance! And I can eat a Japanese person under the table at conveyor sushi restaurants in Tokyo! And I LOVE uni!!! Let's be friends!